Asia's insurance market to sustain growth in 2012

06 December 2011, Hong Kong

  • Asia’s insurance market will see sustained growth in 2012, with emerging markets continuing to outpace developed markets
  • Life insurance premiums in Asia are projected to grow by 4.4% (0.6% in 2011) in real terms, fuelled by rebounds in China and India and expected increased demand for traditional protection-type products
  • Non-life insurance premiums in Asia are forecasted to grow at a slower rate of 6.0% (8.1% in 2011) in real terms, aligned with moderately slower economic growth

Globally, economic weakness, fiscal tightening and an accommodative monetary policy are keeping government yields low, particularly in the US and Germany, which poses a huge challenge to the insurance industry as it reduces investment yields and undermine the profitability of life savings products with interest rate guarantees.

The world economy is expected to grow slower at 2.9% in 2012 amid the Euro debt crisis.

“The global insurance industry faces three main challenges from the current economic and political environment: low government yields, the Euro debt crisis, and slowing growth with elevated inflation in the emerging markets,” says Clarence Wong, Swiss Re’s Chief Economist Asia.

“Emerging Asia is not decoupled from the developed economies and its growth is expected to slow while inflation is elevated. But policymakers have leeway to leverage monetary and fiscal policies to counter economic slowdown. Emerging Asia is forecasted to continue to outperform developed markets,” he adds.

Despite the challenging environment, the global insurance industry has restored capitalisation beyond 2007 levels. Significant catastrophic losses in non-life business have led to a hardening of reinsurance rates.

Moderate life insurance growth, fuelled by protection products

In developed Asia, most markets recorded a stable growth in life insurance premiums in 2011, fuelled by strong demand for investment-linked products in the first-half of the year. Demand also came from retirement (e.g. fixed annuities) and medical (e.g. hospital cash) insurance.

In emerging Asia, the real growth rate of life insurance was weak in China (estimated at -6.0% in 2011) and India (2.5%) due to regulatory tightening of product distribution and design. Other markets, especially Indonesia (11.9%) and the Philippines (12.9%), saw strong or stable growth.

“Across Asia-Pacific, life insurance premiums are expected to grow moderately by 4.4% in 2012, in anticipation of moderately slower economic growth and higher unemployment. Rising economic and investment risks will favour the growth of traditional protection-type products,” says Wong.

Growth in life insurance premiums is expected to rebound in China and India in 2012, at real rates of 11.0% and 7.5% respectively. At the same time, annuities and health products are likely to continue growing robustly, alongside demand for protection-type products.

However, insurers’ investment yields will continue to be constrained by low interest rates, with the risk of worsening negative spreads (i.e. investment yields less than interest rates guaranteed to policyholders) in some markets including Japan.

Slower non-life insurance growth in 2012

Most developed markets in the region recorded stable non-life insurance premium growth in 2011. Business in Australia and Japan have gained from rising risk awareness and firming pricing in the aftermath of major natural catastrophes. But profitability would be affected by higher loss ratios.

In emerging Asia, non-life insurance premium growth remained strong in most markets, including China (estimated at 15.0% in 2011), India (8.6%) and Indonesia (10.3%), in line with stable economic growth and sustained investment in infrastructure. Further increase in car ownership and increasing demand for health and personal accident products were key growth drivers.

Looking ahead, moderately slower economic growth in 2012 will likely affect most non-life insurance business across the region, except for Australia and Japan which will continue to benefit from reconstruction-induced economic growth and firming pricing. The planned liberalisation of motor pricing in China will also bring in more enthusiastic competition. Taking these into consideration, the real growth rate of non-life premiums in Asia is forecasted to ease to 6.0% in 2012 from 8.1% in 2011, subject to any additional fiscal stimulus for economic boosts that will benefit non-life business.

Moreover, the series of natural catastrophes in Asia may have helped to raise risk awareness and prompt corporations to seek sufficient insurance covers. Thus, strong growth is expected in commercial, motor, health and personal accident insurance, as well as some specialty lines such as engineering, agriculture and surety.

Reinsurance growth continues in Asia

“Sustained growth in the primary insurance markets will continue to support reinsurance growth in the region. As insurers are increasingly pressured by new business growth and tightening solvency regulations, many will look for reinsurance solutions to relieve capital strain. Capacity is believed to be sufficient at the right price while competition will remain keen,” says Wong.

Better outlook beyond 2012

The outlook for 2013 is more optimistic as the global economy is expected to recover. Economic growth is expected to normalise, pushing interest rates up. With this improving macroeconomic environment, insurance and reinsurance premium growth and investment performance are anticipated to improve. 

Notes to editors

Please refer to the Appendix below for the classification of developed and emerging markets in Asia, more detailed figures on (1) real GDP growth rates; (2) life insurance real premium growth rate; and (3) non-life insurance real premium growth rate. 

Please also refer to Swiss Re's Global insurance review 2011 and outlook for 2012 and 2013.

Swiss Re

The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of 56 offices globally and is rated "AA-" by Standard & Poor's, "A1" by Moody's and "A" by A.M. Best. Shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed on the SIX Swiss Exchange and trade under the symbol SREN.

Swiss Re has been associated with Asia since 1913 and now has about 1,000 staff in Asia-Pacific. The company's Asia headquarters is in Hong Kong.

Appendix:

Real GDP growth rate 2008 2009 2010 2011 (E) 2012 (E) 2013 (E)
World 1.6% -1.1% 4.7% 3.3% 2.9% 3.6%
   Industrialised countries 0.0% -3.8% 2.8% 1.5% 1.3% 2.2%
   Emerging markets 5.7% 3.4% 7.7% 5.8% 5.6% 6.1%
Asia





   Developed Asia            
      Australia 2.6% 1.4% 2.5% 1.8% 3.8% 3.5%
      Hong Kong 2.3% -2.7% 6.8% 5.5% 4.0% 4.5%
      Japan -1.2% -6.3% 4.1% -0.2% 2.3% 1.6%
      Korea 2.4% 0.2% 5.2% 3.6% 3.8% 4.0%
      Singapore 1.5% -2.0% 14.5% 5.0% 4.0% 4.3%
      Taiwan 0.1% -1.9% 10.9% 4.6% 4.4% 3.7%
   Emerging Asia            
      China 9.6% 9.2% 10.4% 9.1% 8.8% 8.2%
      India 6.7% 7.4% 8.4% 7.2% 7.0% 8.1%
      Indonesia 5.8% 4.5% 6.1% 6.4% 5.7% 5.9%
      Malaysia 4.1% -1.7% 7.3% 5.0% 4.8% 4.8%
      Philippines 4.7% 1.0% 7.3% 4.5% 4.6% 4.9%
      Thailand 4.8% -2.3% 7.9% 2.5% 3.5% 4.8%
      Vietnam 6.3% 5.3% 6.8% 6.0% 6.3% 6.1%







Life insurance real premium growth rate 2008 2009 2010 2011 (E) 2012 (E) 2013 (E)
World -7.2% -0.2% 3.7% -1.4% 3.1% 3.7%
   Industrialised countries -9.5% -1.1% 2.6% -1.8% 2.2% 2.9%
   Emerging markets 14.7% 6.5% 10.5% 0.6% 8.4% 8.3%
Asia 2.0% 4.3% 8.3% 0.6% 4.4% 4.5%
   Developed Asia -2.9% 1.8% 5.6% 1.7% 2.5% 2.7%
      Australia -16.2% -15.6% -0.7% 6.7% 4.0% 4.5%
      Hong Kong -11.5% -4.7% 9.4% 11.0% 5.3% 5.6%
      Japan 1.5% 4.7% 4.6% 3.0% 2.0% 2.0%
      Korea -6.4% 1.8% 4.5% -1.5% 3.8% 3.9%
      Singapore -9.1% -14.3% 4.1% 5.9% 3.3% 7.2%
      Taiwan -1.7% 4.9% 15.8% -8.0% 1.5% 2.5%
   Emerging Asia 19.3% 11.1% 15.3% -2.1% 9.5% 8.7%
      China 40.9% 12.8% 25.7% -6.0% 11.0% 8.0%
      India 1.7% 7.9% -3.6% 2.5% 7.5% 11.0%
      Indonesia -0.5% 15.8% 16.7% 11.9% 8.2% 9.8%
      Malaysia -2.6% 7.0% 8.5% 6.3% 5.3% 5.5%
      Philippines -31.7% -2.5% 19.0% 12.9% 5.6% 7.2%
      Thailand 3.2% 16.7% 9.8% 4.8% 5.6% 6.0%
      Vietnam -14.9% 0.7% 12.7% 4.6% 8.6% 11.6%







Non-life insurance real premium growth rate 2008 2009 2010 2011 (E) 2012 (E) 2013 (E)
World -1.6% 0.1% 1.7% 1.8% 2.6% 3.9%
   Industrialised countries -2.6% -0.5% 0.5% 0.6% 1.7% 2.9%
   Emerging markets 6.1% 3.9% 9.6% 8.9% 7.0% 8.6%
Asia 2.1% 7.2% 9.7% 8.1% 6.0% 6.3%
   Developed Asia 0.2% 3.6% 3.3% 5.6% 3.5% 3.3%
      Australia 2.1% 4.3% 1.0% 1.2% 2.4% 4.7%
      Hong Kong 5.6% 7.2% 2.2% 6.5% 4.0% 4.6%
      Japan -4.0% -0.2% -0.2% 4.2% 2.2% 1.5%
      Korea 6.6% 12.4% 13.4% 11.4% 6.3% 5.3%
      Singapore 6.3% -1.0% 6.2% 4.1% 4.4% 5.9%
      Taiwan -7.5% -4.6% 2.9% 8.2% 6.4% 5.2%
   Emerging Asia 7.7% 16.5% 24.0% 12.8% 10.6% 11.5%
      China 10.7% 23.2% 30.3% 15.0% 12.0% 13.0%
      India 1.6% 3.2% 9.2% 8.6% 7.9% 8.5%
      Indonesia 11.7% 2.1% 13.6% 10.3% 4.0% 4.5%
      Malaysia 3.6% 5.2% 7.2% 4.6% 3.7% 4.7%
      Philippines -0.2% 1.4% 12.0% 2.8% 1.5% 2.4%
      Thailand -0.3% 4.4% 9.5% 5.4% 5.7% 6.1%
      Vietnam 2.6% 9.8% 13.0% 6.9% 9.2% 11.3%


Source: Swiss Re Economic Research & Consulting